Risk Management, Contract Size, and Pips

Alright, very first post. Haven’t thought about the structure of the blog, but a key topic that comes to mind is Risk Management.

When trading, it pays to know the maximum of what you are risking each time you initiate a trade. A clear-cut way is by a percentage of the Balance of your account, AccountBalance(), or specifically your available Free Margin, AccountFreeMargin(), which is the Balance when you have no open positions, or if you do, the margin not utilised by them.

Simply, if I want to risk 3% of my $10k account. That’s $300.

So now the question becomes, how large a contract size should I trade such that if my stop loss is hit, it is going to be $300?

As you can see, the value of 1 pip is different for different pairs, however, since you have adjusted the contract size accordingly per currency pair, 60 pips will always be $300, or 3% of your $10k account.